Great to see progress on this 'bug'.

For what it's worth, this is how i managed to produce the situation in
the first place; i installed Lucid (server, amd64) in a VM. Installing
Grub bailed out in the installer because of VirtIO weirdness and i had
to select 'do not install any bootloader'. Then i manually installed
Grub on the disk from the ALT-F3-console. Finished the installation-
steps on the ALT-F1-console, rebooted, and ran an update which installed
a new grub.

At the moment Grub was updated i encountered the 'bug'.

HTH, Thanks for all the hard work. Wish i had time to test it thoroughly
for you too.

-- 
Option 'No' at question 'Continue without installing GRUB?' does nothing. 
Forced to answer 'Yes'.
https://bugs.launchpad.net/bugs/580408
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